Russia's Stock Market Is Tumbling Again

The world awaits Sunday's referendum in Crimea where voters will be ask whether they want to join.

Meanwhile, Russia's MICEX index continues its slide, fall 2% today. At it's lowest point today, it was down 5.2%. Year-to-date, it's down 20.4%.

Most experts seem to agree that the referendum is illegal as it is out of line with Ukraine's constitution.

"Moreover, we note that previous measures of Crimean public opinion have not revealed a clear majority in favour of joining Russia: in 1991, 54% of the population voted for Ukrainian independence, and in an opinion poll in early February, 41% of the population said they wanted to join Russia," said Morgan Stanley's Russia economics and strategy team. "Nonetheless, it is widely expected that Sunday’s referendum will deliver a strong majority in favour of joining Russia, and that Russia, which recognizes the current Crimean authorities as legitimate and argues that the Kiev authorities are not legitimate, will then pass a law allowing external territories to accede to Russia, paving the way for the Russian Federation to annex Crimea."

"If there is no sign of any capacity to be able to move forward and resolve this issue, there will be a very serious series of steps in Europe and here with respect to the options that are available to us," said U.S. Secretary of State John Kerry on Thursday.

"While we expect de-escalation eventually, near term, further sanctions are likely, although we expect the impact will be manageable," said Morgan Stanley. They consider three scenarios:

(i) Russia annexes Crimea post-referendum, (ii) Russia intervenes in Ukraine beyond Crimea, or (iii) a negotiated settlement. While Crimea and Russia continue on the track of annexation without diplomatic engagement, we expect further visa bans and asset freezes. If Russia were then to annex Crimea or to intervene further in Ukraine, we’d expect broader trade and finance sanctions.

"Short term, Russia’s strong reserve asset position should limit the effect of sanctions," they noted. "Longer term, sanctions could mean lower growth in Russia, due to more expensive and less easily available finance, and a growing role for the state in the economy, while heightened security tension could impact global growth."

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